11. Income Taxes

Due to the net losses in 2025 and 2024, the provision for income taxes consists only of minimum California franchise taxes presented in general and administrative expenses.

On July 4, 2025, the 2025 budget reconciliation bill, officially known as the One Big Beautiful Bill Act of 2025 (the “Act”), was enacted into law. The Act includes a broad range of tax reforms such as deductions for domestic research and development expenditures and federal bonus depreciation. The Company has evaluated the provisions of the Act and determined that, because it maintains a full valuation allowance against its deferred tax assets, the Act does not have a material impact on the Company’s condensed consolidated financial statements or effective tax rate.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on this evaluation, as of December 31, 2025 and 2024, a full valuation allowance has been recorded because deferred tax assets have been assessed to be less than “more likely than not” to be realized.

As of December 31, 2025, the Company has Federal and California research and development credit carryforwards of $4.4 million and $9.0 million, respectively. The Federal research and development credit carryforwards will expire beginning in 2036 if not utilized. The California research and development credits have no expiration date.

Under recently enacted U.S. tax legislation, although the treatment of tax losses generated in taxable years ending before December 31, 2017, has generally not changed, tax losses generated in taxable years beginning after December 31, 2017, may only be utilized to offset 80% of taxable income annually. This change may require NPM and Legacy SSMP to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years.

To the extent that each of the tax filers continue to generate taxable losses, unused losses will carry-forward to offset future taxable income, if any, until these unused losses expire. However, the tax filers may be unable to use these losses to offset taxable income before our unused losses expire at various dates that range from 2030 through 2037 for federal net operating losses ("NOLs") generated before 2018. Federal net operating losses generated for year 2018 and forward do not expire. State net operating losses expire from 2030 through 2042. Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carry-forwards to offset its post-change taxable income may be limited. Limitations may also apply to the utilization of other pre-change tax attributes as a result of an ownership change.

Second Sight Medical Products, Inc. experienced an “ownership change” within the meaning of Section 382(g) of the Code during the third quarter of 2022 as a result of the merger. The ownership change will subject its net operating loss carry-forwards to an annual limitation, which will significantly restrict its ability to use them to offset taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of stock at the time of the ownership change multiplied by a tax-exempt interest rate specified by the Internal Revenue Service. We have not yet fully analyzed the available information to determine the amount of the annual limitation.

As of December 31, 2025, the Company had $2.3 million of unrecognized tax benefits which are comprised of federal of $0.9 million and California of $1.4 million. The Company’s unrecognized gross tax benefits would not reduce its annual effective tax rate if recognized because the Company has recorded a full valuation allowance on deferred tax assets. The Company does not foresee any material changes to its gross unrecognized tax benefit within the next 12 months. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company did not recognize any accrued interest and penalties related to gross unrecognized tax benefits related to the year ended December 31, 2025 and 2024. All years are open for examination by federal and state authorities. The Company currently has no federal or state tax examinations in progress.

Beginning January 1, 2022, we are required to capitalize certain research and development expenditures in accordance with section 174 of the Internal Revenue Code, as amended by the Tax Cuts and Jobs Act of 2017, instead of previously being allowed to expense. Amortization of such capitalized expenditures are allowed over a 5-year period if incurred in the U.S. or a 15-year period if incurred outside the United States.

We file income tax returns in the U.S. federal jurisdiction and various states and are subject to income tax examinations by federal tax authorities for tax years ended 2017 and later and by state authorities for tax years ended 2016 and later. We currently are not under examination by any tax authority. Our policy is to record interest and penalties on uncertain tax positions as income tax expense. As of December 31, 2025 and 2024, we have no accrued interest or penalties related to uncertain tax positions. Second Sight Switzerland, our foreign subsidiary, has not had any taxable income in the prior and current years.